+++ APPLE ’s brand extends far beyond technology and coolness. The company has accumulated incredible goodwill with consumers. So whenever Apple comes out with the Apple Car, it will grab a disproportionately large market share from General Motors and other automakers precisely because of that deep well of goodwill. By the time young children learn to drive, internal combustion engines will likely be a relic consigned to museums (just like Ford’s Model T). I had this “Aha!” moment recently when I visited a Tesla store and saw its cars’ power train. It looks just like a skateboard: basically a flat slab of metal (which houses the battery), 4 wheels, and an electric engine the size of a large watermelon. That’s it: the Tesla has only 18 moving parts. Wall Street nowadays is going gaga over the stocks of auto dealerships and automakers. I am in the minority in thinking that party will come to an end. Just like Tesla, Apple is not going to be using a dealership model to sell its cars. Just as with the iPhone, the company will want complete control of the buying experience. If both Tesla and Apple bypass the dealership model, the GMs of the world will be at an even larger competitive disadvantage. They will have to abandon the dealership model too. Yes, I know, selling cars directly to consumers is not legal in many states, but if the U.S. Constitution could be amended 27 times, the law on car sales (which is an artifact of the Great Depression) can be amended as well. The traditional dealership model is unlikely to survive anyway, as its economics dramatically degrade in the electric-car world. A car with few moving parts and minimal electronics has few things to break. Consequently, electric cars will need less servicing, throttling the dealerships’ most important profit center. What is also amazing about electric cars is that they aren’t that much different from smartphones. Smartphone prices have declined significantly because their components became ubiquitous and commoditized. The simplicity of electric cars and the declining ambition of Tesla, Apple, and whoever else enters that space to be known as a ‘car’ company will likely lead to commoditization of components and thus lower prices. Tesla today is more a software and battery company than a car company. Think back to the day when Apple introduced the iPhone. No one suspected that it (and the smartphones that followed) would enable a service like Uber, which is putting cabdrivers worldwide out of business. The baby boomer generation romanticizes cars. Most boomers can recite the horsepower and other engine specs of every car they have ever owned. For the tail end of Gen-X and Millennials, a car is an interruption between Facebook and Twitter. They know the brand of speakers in our car but if asked would have to Google its horsepower. They feel little romanticism for cars and have much higher brand loyalty to Apple and Google than to GM or Ford. When Apple makes its entrance into the auto industry, it will likely be successful and highly disruptive. After all, Apple has the much-needed software know-how to design a car (Apple is already working with car companies on CarPlay, the iPhone-centered car infotainment system). Apple boasts a global network of stores, possesses unlimited resources ($150 billion of net cash and $50 billion of free cash flows annually), and its imagination has not been damaged by decades of producing cars with internal combustion engines. Let me stress that last point. There is a good reason why Nokia, which at one time was the dominant cellphone manufacturer, failed to compete with the iPhone. It had too much institutional knowledge. Nokia had hundreds of engineers who tried to add IQ to a dumb phone. The company was attempting to convert Symbian, a dumb-phone operating system, into a smartphone operating system. Despite Apple showing Nokia how the smartphone should look, the company couldn’t see its product as a smartphone but rather just as the next iteration of a dumb phone. General Motors’ answer to Tesla has been no different from Nokia’s response to the iPhone. GM came out with the Chevrolet Volt, which was really one of its internal combustion engine (ICE) cars with an electric engine dumped in. Unless an ICE car company creates a silo unit isolated from the rest of the operation, it will be extremely difficult if not impossible to get engineers who have designed ICE vehicles all their lives to change their thinking and turn into electric-car engineers. +++

+++ The AUDI Group achieved revenue of 30.1 billion euro and operating profit of 2.7 billion euro in the first half of 2017. Audi improved its operating performance compared with the first half of last year. The operating return on sales increased to 8.9 percent and is clearly within the target corridor of 8 to 10 percent. Worldwide deliveries of Audi brand cars were lower than in the first half of 2016 following the temporary decrease in sales in China. In June, unit sales in China increased again and reached their highest ever level for the month of June. The company anticipates stronger sales worldwide in the second half of the year, while advance expenditure for new models will have a greater financial impact than in the first 6 months of this year. “The world premiere of the new Audi A8 at the first Audi Summit was the start of a major rollout of new models”, stated Rupert Stadler, Chairman of the Board of Management of Audi. The new generation of the Audi flagship has been developed as the world’s first series-produced car for highly automated driving, and in the form of a mild hybrid or plug-in hybrid featuring high-voltage technology it is systematically electrified in all powertrain versions. “By the middle of 2018, we will present new generations of 4 more core model series. In addition, we will expand our product offering in the top segments next year with the Audi Q8 and the fully electric Audi e-Tron”, said Stadler. From January through June 2017, the Ingolstadt‑based company delivered 908,955 automobiles with the Four Rings to its customers (H1 2016: 953,293). The Audi Group’s revenue for the first half of the year amounted to 30,143 million euro (H1 2016: 30,134 million euro). Operating profit increased to 2,680 million euro (H1 2016: 2,401 million euro or 2,666 million euro after adjusting for special items) and the operating return on sales rose to 8.9 percent (H1 2016: 8.0 percent or 8.8 percent after adjusting for special items). “We achieved robust earnings in an extremely challenging first half of the year”, stated Axel Strotbek, Board of Management Member for Finance, IT and Integrity. “The efficiency measures of our Speed Up! program are leading to the first successes”. For example, the company has optimized its research and development efficiency and reduced the ratio of research and development costs to revenue to 6.9 percent (H1 2016: 7.5 percent). In the long term, Audi plans to reach a level of between 6 and 6.5 percent. The effects of Speed Up! are apparent also in significantly lower distribution costs. “We will continue working on our efficiency, because our profitability target applies also in the electric era”, said Strotbek. The Audi Group’s profit before tax increased to 2,798 million euro in the first half of the year due also to the significant increase in financial income (H1 2016: 2,190 million euro). Among other things, the entry of new investors at Here in the first quarter of this year led to a positive effect of 183 million euro on income from investments accounted for using the equity method. The net cash flow decreased to 1,879 million euro (H1 2016: 2,085 million euro). This includes anticipated payments in a triple-digit-million euro amount in connection with the diesel issue. With a view to the rest of the year, Axel Strotbek stated, “We are preparing a whole array of model launches in parallel. This advance expenditure will be more strongly reflected in our earnings and cash flow, especially in the fourth quarter”. Capital expenditure in the first half of the year amounted to 1,156 million euro (H1 2016: 1,238 million euro), equivalent to 3.8 percent of revenue (H1 2016: 4.1 percent). For the full year, Audi anticipates a capital expenditure ratio of 5.0 to 5.5 percent. In full-year 2017, the company plans to slightly increase its deliveries of Audi cars compared with the previous year. The Audi Group also anticipates slight revenue growth compared with 2016. The operating return on sales should be within the strategic target corridor of 8 to 10 percent. +++

+++ It seems there was some credibility to recent reports that Ford and General Motors would be shedding some of their large sedans in the United States. In particular, CADILLAC president Johan de Nysschen confirmed that the XTS, CTS and ATS won’t spawn direct replacements. De Nysschen said a new CT5 mid-sizer will be introduced to fill the void of the XTS, CTS and ATS once the 3 models reach the end of their respective life cycles around 2019. The change is part of Cadillac’s plan to “rebalance” its portfolio in response to falling demand for sedans, particularly in the U.S. He also reiterated plans for a compact sedan, likely called a CT4, to take on the Audi A3 sedan and upcoming Mercedes-Benz A-Class sedan. The CT5 and so-called CT4 will be built at GM’s Lansing Grand River Assembly Plant where the CTS and ATS are currently built. The CT5 will target sedan buyers in the $35,000 to $45,000 range. And below $35,000, there will be the CT4. Meanwhile, the full-size CT6 will remain at the top, although it will soon be updated to integrate Cadillac’s new design language previewed on the hugely popular Escala concept unveiled last summer. The CT6 will continue to appeal to sedan buyers with budgets over $50,000. Other new models headed for Cadillac’s showroom will be an XT4 compact crossover due in 2018, and a mid-size crossover with third-row seats and likely called an XT6 due in 2019. Sadly, there was no mention of the sports car flagship that de Nysschen hinted at in 2014 in his latest interview. +++

+++ HONDA is studying the possibility of a new crossover to slot beneath the HR-V small SUV to boost its appeal with younger buyers. While still some time away, the baby crossover is expected to be based on the next-generation Jazz light car due in about 2019, with the redesigned BR-V that is not sold in Europe shaping up as the most likely contender. According to Honda regional director Stephen Collins, there is significant growth potential in the bottom end of the light-SUV market that is currently occupied by the likes of the Suzuki Ignis. “One of our priorities now is lighter SUVs”, he told at the launch of the 5th generation CR-V. “We think this is probably the next segment to grow. We’re looking at options. There are a few around the world that are not currently suitable for this market, but we’re investigating for the future that we could position something under HR-V. There’s BR-V, WR-V. They’re currently made for different markets, so probably not suitable for this generation of car. But you’ll never know what happens with the next generation”. Short for Bold Runabout Vehicle, the existing BR-V was launched in India, Africa and South-East Asia 2 years ago as an entry-level, 5-seater crossover with 7-seat capability. Based on the Honda Brio micro-car platform introduced in other markets in 2011, it shares some of its front-drive mechanicals with the current Jazz, including an iteration of the latter’s 1.5-litre four-cylinder petrol engine, and sits on a 2.660 mm wheelbase. The WR-V (for Winsome Runabout Vehicle), meanwhile, is essentially a jacked-up derivation of today’s third-generation Jazz, and it also uses Honda’s larger Global Small Car architecture. Targeting a slightly less cost-conscious male-orientated lifestyle buyer, it was developed primarily for the South American and Indian markets, and sits on a 105 mm shorter wheelbase than the more family-orientated BR-V. +++

+++ The rise of the SUV is continuing unabated in the first half of 2017. New figures released by JATO show sales volumes grew by a breathtaking 19.7 percent, meaning SUVs stretched their lead over all other cars as Europe’s favourite type of vehicle. 28.3 percent of new car buyers have bought an SUV thus far in 2017, up from less than 25 percent in the first half of 2016. The next-most-popular type of European car is the B segment supermini, but that’s way down on 21.5 percent of sales: 1.8 million sales compare to almost 2.4 million sales of SUVs. And while the C segment family hatch lines up in third place, with 1.6 million sales, its share has actually fallen by 1.3 percent so far in 2017. A formerly popular sector also continues its downward spiral. Sales of MPVs plummeted by 14.8 percent, to fewer than 700,000 models, meaning they only just came out ahead of A segment city cars in the sales rankings: both are around 8 percent of the marketplace. D segment large family cars are also still declining, falling to less than 8 percent of the market. It wasn’t so long ago when the default family holdall may have been a Ford Mondeo: today, it’s much more likely to be a Skoda Kodiaq. The latest research from JATO also shows how sports cars and coupes are continuing to fall. Sales of less than 67,000 units mean they command just 0.8 percent of the market, a 4.7 percent decline compared to the same period in 2017. In contrast, although they’re Europe’s least popular type of car, sales of luxury models are growing, with 4.2 percent growth in 2017. When you consider the fact luxury cars can easily cost 250,000 euro or more, that’s quite some growth in profit margins for their respective brands … +++

+++ Hate visiting your car’s service centre? If all goes according to plan, for TESLA , you might be in luck. At the launch of its all-new Model 3, the Californian car maker made the bold claim that the new model will require servicing … almost never. Tesla CEO Elon Musk said: “The next generation powertrains are designed to be a million miles between services”. The Model 3 uses a brand-new electric motor, battery cells and drivetrain in comparison to the Model S and X. While Musk didn’t qualify his statement, I imagine that things like battery coolant, wiper fluids, tyres and brakes (as consumables) would require regular servicing and replacement. Tesla’s Model 3 launches with a 4-year warranty for the vehicle and an 8-year warranty for the battery system. The company is in the midst of a massive service centre and supercharger expansion, which Musk says is on track to remove a need to visit a service centre ever. “As far as service is concerned, we’re adding a tonne more service centres, as well as the ability to service cars at people’s homes. Service wait times are very low”, Musk said. Soon customers will be able to schedule services via the vehicle’s infotainment screen. The service schedule will be a live look at available time slots at Tesla service centres and will also allow customers to organise a service at home or at work where the car doesn’t need to leave premises. +++

+++ TOYOTA is giving the United Kingdom a special status for the new Yaris GRMN hot hatch: from the limited-run production of just 400 Yaris GRMNs, 100 of them are coming to the UK alone. That’s 25 percent of the series build, despite the hot Yaris also being sold in multiple other European markets. Such is Brits’ love of a good hot hatch. In a way, it’s fitting that we’re getting so many: although the Yaris GRMN itself is built in France, the engine originates from Toyota’s North Wales Deeside plant. The 1.8-litre motor has been supercharged and given a high-pressure fuel injection system that boosts power sufficiently for the Yaris GRMN to run from 0-100 km/h in 6.3 seconds. That’s faster than hot hatch rivals such as the Ford Fiesta ST, Peugeot 208 GTI and Renault Sport Clio 200. +++